Everything to Know about Macro and Markets
Markets rallied on Friday, reversing their previous declines, but still locked in a sharp weekly drop. The Dow Jones Industrial Average (DJIA) fell by 2.3%, its worst weekly showing in a year, while the S&P 500 (SPX) notched its largest weekly decline since January, giving up 1%. Technology benchmarks Nasdaq Composite (NDAQ) and Nasdaq 100 (NDX) saw weekly declines of under 1%, as a Friday surge helped stem losses.
On Friday, investors were encouraged by the economy’s strength transpiring from the labor-market reports, despite the fact that it could postpone the Federal Reserve’s rate cuts. U.S. payrolls surged, topping even the most optimistic estimates. Moreover, the unemployment rate edged lower and workforce participation increased, while wages rose at a robust pace.
Earnings Under Spotlight
While the strength of the job market spells a lack of urgency for cutting rates, the prospective delay in monetary easing is now perceived as bullish. A change in monetary policy would likely only be caused by the fact that there’s no recession in sight, portending robust corporate earnings.
This outlook was further confirmed by investor data, which showed that U.S. stocks attracted $7.1 billion in the week through Wednesday, while their annualized inflows year-to-date are the second-highest ever at $310 billion.
This week, the assumption about the continued strong corporate profitability will begin to be put to the test, as the Q1 2024 earnings season kicks off on Friday with the reports from the leading banks. With the stock valuations near their two-year high, earnings – and even more importantly, further guidance – will draw increased investor attention and pave the path forward for stock-market performance.
Macro Developments in Focus
Investors will also focus this week on the incoming economic data and minutes from the March FOMC meeting.
Last week, several policymakers spoke about the interest rates outlook. Dallas Fed President Lorie Logan said that it is too early to consider cutting interest rates, and Governor Michelle Bowman shared that she is concerned about persistent upside risks to inflation. The latest comments from Fed Chair Jerome Powell also underscored that policymakers are not convinced inflation has sustainably subsided and are looking for further proof in the data.
Although Powell said that the recent hotter-than-expected job market data doesn’t “materially change the overall picture” regarding policy outlook, several more overly strong data points may tip the balance to fewer rate cuts this year than were previously expected.
For this reason, the central bank members, as well as investors, will closely watch the CPI and PPI reports scheduled to be released this week. In addition, the consumer inflation expectations report is of utmost importance, as these views are factored into the Fed’s calculations.
Notable Stock News
¤ Meta Platforms (META) was the best performer of the megacaps last week, clocking in a surge of over 8% after several Wall Street analysts increased their price targets for the stock.
¤ Tesla (TSLA) tumbled after Reuters reported that the company scrapped plans to produce an affordable vehicle, but clawed back some of the loss after Elon Musk denied the claim. The EV maker still locked in the worst weekly performance among the megacaps.
¤ Intel (INTC) was Nasdaq’s top loser, registering its worst week since 2020 after the company said that operating losses of its foundry business will deepen this year after a $7 billion shortfall last year.
¤ GE Aerospace (GE) led the gains in the S&P 500, soaring almost 12% over the week after it completed the split-up from GE Vernova (GEV).
Upcoming Earnings and Dividend Announcements
The Q1 2024 earnings season is kicking off, with several newsworthy earnings releases scheduled for this week.
This week’s most notable earnings reports will be published by Delta Air Lines (DAL), Constellation Brands (STZ), JPMorgan Chase (JPM), Wells Fargo (WFC), BlackRock (BLK), Citigroup (C), and State Street (STT).
Ex-Dividend dates are coming this week for Oracle (ORCL), Verizon (VZ), General Mills (GIS), Darden (DRI), General Dynamics (GD), AbbVie (ABBV), and other dividend-paying firms.
For more exclusive market insights and content from TipRanks Macro & Markets research analyst Yulia Vaiman, click here.
